Spread Scan with Commentary

Commentary by Andy Jordan Trader, Trading Mentor for Spread & Swing Trading Trading Educators, Inc. Welcome to this week’s issue of the Joe Ross Spread Trading Newsletter. The Spread Scan weekly newsletter is designed to assist you in becoming a better, more complete trader by showing you, within the context of the markets, how to trade spreads.

Be sure to read through our free powerpoint spread presentation which describes the rationale for trading spreads, and gives you quite a bit of information about what they are and their advantages. Follow this link to our Spread Trading Website to read through Joe Ross' free powerpoint presentation: Spread Trading - A Whole New Way to Trade. Weekly Spread Scan Example This week we look at 100*SMN1 - 600*BON1: long July 2011 Soybean Meal and short July 2011 Soybean Oil Today we consider an inter-market equity spread in the Soybean Complex: long July 2011 Soybean Meal and short July 2011 Soybean Oil (100*SMN1 - 600*BON1). The spread has been trading to the downside in big swings since September 2010. After testing the break even level for the second time at the beginning of April (the first time was in March 2010), the spread might be ready for its seasonal up move. The up move usually starts at the end of April and lasts until the end of June. Because of the high volatility of this spread, the recommended risk is around $1,000 per spread contract, or, depending on the entry level, even higher.

Previous Trades

On April 11 we told subscribers of our professional daily spreads & position/swing trading newsletter Traders Notebook, "Consider entering a Heating Oil calendar spread: long December and short July Heating Oil at a close above 7.32. Suggested risk is $550; initial projected objective is $550, then higher. Basis is seasonal (mid April until end of May) and a new high. Comment: This spread is not very liquid. If you want to enter the spread around the close (see recommended entry times in TN), you need to work with a limit order to avoid slippage. You might also wait until the close and then place a limit order overnight at the close price."

Here's how we suggested managing this trade:

04/12 Suggest entering the spread at 7.50 limit (GTC).

04/13 In at 7.50 overnight (some traders got filled at this level). Suggested stop on close at 6.50; suggested first target at 8.50.

04/15 Everyone should be in this trade now at 7.50; suggested stop on close at 6.50.

04/20 It was possible to cash in the first lot at 8.50. Suggested stop on close at 7.60.

Visit our Spread Website for more information about our daily newsletter, Traders Notebook.

Be sure to read through our free powerpoint spread presentation which describes the rationale for trading spreads, and gives you quite a bit of information about what they are and their advantages. Follow this link to our Spread Trading Website to read through Joe Ross' free powerpoint presentation: Spread Trading - A Whole New Way to Trade.

Andy's Trading Articles

Student's Question: Hi Andy! What is the best way to enter or exit the spread trades?

Andy: I think there is no “best way” to enter or exit spread trades, there is only “your way.” Let me explain:

I personally prefer the open and the close to enter all my spreads. I don’t like to watch my spreads during the day, so I focus only on the closing price.

Most buying and selling is at the open and at the close, especially in thin markets. When you use a limit order, you can enter anytime you want (even overnight), but you might have the problem of not getting filled. Limit orders are an important tool for getting in and out of markets with low volume.

If you are a trader from Australia, for example, you will find it very inconvenient to enter around the close because this would mean you would have to stay up all night, or you would have to give the responsibility to your broker. If entering at the close is not comfortable for you, just enter the next day around the open (I recommend to wait a few minutes at the open until the market slows down).

In the long run it doesn’t matter. It is more important that you feel comfortable with the timing of your entry and exit.

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About Spread Scan

The Spread Scan weekly newsletter is designed to assist you in becoming a better, more complete trader by showing you, within the context of the markets, how to trade spreads.

About Andy Jordan

Andy Jordan made his first option trade at the age of 18. Since then he has been fascinated by the world of trading. In 2002 he met Joe Ross, and became interested in spread trading. Andy was then intensively tutored by Joe Ross and personnel at Trading Educators. Andy is the founder and president of Jordan Trading, S. A. Even though Andy has shown through live chats and in several trading journals that he is able to day trade today's markets, spread trading has always been his preference. In addition to his own spread trading activities, Andy is the editor of Traders Notebook. For those interested in one-on-one personal coaching, Andy has developed and instructs an online course in spread trading, "Trading Mentoring - Trade with a Pro," during which he demonstrates all aspects of trading from choosing the trades on through how and when to enter the trades, manage the trades, and exit the trades.

Andy Jordan was born 1965 in Germany, but is currently living in the Caribbean. He has studied mathematics and business administration in Regensburg and Hagen, and holds a PhD in mathematics.

About Joe Ross

Joe Ross has been trading and investing since his first trade at the age of 14, and is a well known Master Trader and Investor. He has survived all the up and downs of the markets because of his adaptable trading style, using a low-risk approach that produces consistent profits.

Joe Ross is the discoverer of the Ross hook™, and has set new standards for low-risk trading with his concepts of "The Law of Charts™ " and the "Traders Trick Entry™." Joe was a private trader and investor for much of his life, but a serious health situation in the late 80's caused him to shift his focus, and that is when he decided to share his knowledge. After his recovery, he founded Trading Educators in 1988, to teach aspiring traders how to make profits using his trading approach.

Joe Ross has written twelve major books and countless articles and essays about trading. All his books have become classics, and have been translated into various languages. His students from around the world number in the thousands. His file of letters containing thanks and appreciation from students on every continent (now including Antarctica) is huge. As one tutoring student, a successful trader, wrote: "You have no idea how much improvement in my life and in my trading efforts have those three days with you brought to me."

Joe Ross, the CEO of Trading Educators, holds a Bachelor of Science degree in Business Administration from the University of California at Los Angeles. He did his Masters work in Computer Sciences at the George Washington University extension in Norfolk, Virginia. He is listed in "Who's Who in America." After 5 decades of trading and investing, Joe Ross still tutors, teaches, writes, and trades regularly. Joe is the primary author and Editor-in-Chief of the company's newsletters: Chart Scan™, Spread Scan™, Options Scan™, and Traders Notebook™. He is also the host of the free Traders Live Chat, the free European Chat for Traders, and the moderator of his popular trading forum.

Joe's philosophy for helping traders is:

"Teach our students the truth in trading — teach them how to trade"

Joe sets forth the mission of Trading Educators as follows:

• To show aspiring futures traders the truth in trading by teaching them how to read a chart so that they can successfully trade what they see, and by revealing to them all of the insider knowledge they need in order to understand the markets.
  
• To enable them to trade profitably by training them to properly manage their trades as well as their mindset and self-control.

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